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Facts
The assessee, engaged in manufacturing biomass briquettes, filed a return for AY 2013-14 declaring income of Rs. 16,310/-. The Assessing Officer (AO) made additions of Rs. 90,72,336/-, assessing total income at Rs. 90,88,646/-. The CIT(A) confirmed these additions, leading to the present appeal.
Held
The Tribunal noted that in the remand report, the AO recommended deletion of additions related to deduction u/s 80JJA, depreciation, and unaccounted purchases. The CIT(A)'s order was contrary to the remand report. For the capital introduction of Rs. 27,00,000/-, additional evidence (affidavit) was admitted, and the issue was restored to the AO for fresh verification. The issue of Rs. 10,00,000/- related to VPR Vittal was also remanded for reconciliation due to contradictions.
Key Issues
Whether the additions made by the AO and confirmed by the CIT(A) are justified. Whether the capital introduction and related issues require further examination or can be deleted.
Sections Cited
80JJA, 69
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Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ Bench, Hyderabad
Before: Shri Ravish SoodShri Madhusudan Sawdia
(िनधा�रण वष�/Assessment Year: 2013-14) Shri Arutla Charan Reddy Vs. Income Tax Officer Hyderabad Ward 15 (1) PAN:AKQPR4282B Hyderabad (Appellant) (Respondent) िनधा��रती �ारा/Assessee by: Shri Mohan Kumar, Advocate राज� व �ारा/Revenue by:: Shri Sankar Pandi P Sr.DR सुनवाई की तारीख/Date of hearing: 15/01/2026 घोषणा की तारीख/Pronouncement: 21/01/2026 आदेश/ORDER Per Madhusudan Sawdia, A.M.:
This appeal is filed by Arutla Charan Reddy (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”) dated19.06.2025 for the A.Y. 2013-14. 2. The assessee has raised the following grounds of appeal:
3. The brief facts of the case are that the assessee is an individual engaged in the business of manufacturing biomass briquettes from processing of biodegradable waste. The assessee filed his return of income for the Assessment Year 2013–14 on 26.08.2013 declaring total income of Rs.16,310/-, after claiming deduction under section 80JJA of the Income Tax Act, 1961 (“the Act”) amounting to Rs.18,52,037/-. The case of the assessee was selected for scrutiny and accordingly, the Learned Assessing Officer (“Ld. AO”) issued notice under section 143(2) of the Act. After considering the submissions made by the assessee, the Ld. AO completed the assessment under section 143(3) of the Act vide order dated 26.03.2016, making additions aggregating to Page 2 of 13 Rs.90,72,336/- and assessed the total income of the assessee at Rs.90,88,646/-.
4. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) confirmed the additions made by the Ld. AO and dismissed the appeal of the assessee.
5. Aggrieved with the order of the Ld. CIT (A), the assessee is in further appeal before this Tribunal. At the outset, the Learned Authorized Representative (“Ld. AR”) submitted that ground nos. 1 and 7 of the appeal are general in nature and the assessee is not pressing the ground no. 4 of the appeal. Therefore, no separate adjudication is required on ground nos. 1, 4 and 7. Accordingly, the ground nos. 1, 4 and 7 of the appeal are dismissed as not pressed.
The Ld. AR submitted that ground no. 2 relates to the denial of deduction under section 80JJA of the Act amounting to Rs.18,52,037/-, ground no. 5 relates to disallowance of depreciation amounting to Rs.10,39,271/- and ground no. 6 relates to the addition of Rs.21,37,925/- made on account of alleged unaccounted purchases. It was further submitted that during appellate proceedings, the Ld. CIT(A) had called for a remand report from the Ld. AO. The Ld. AR invited our attention to para nos. 5,8 and 9 respectively of the remand report and submitted that after verification of the relevant documents, bills and books of account, the Ld. AO had categorically recommended that all the three additions be deleted. The Ld. AR further drew our attention to para nos. 8.7, 8.6 and 8.8 respectively of the order of the Ld. CIT(A) and submitted that, despite the favourable
Page 3 of 13 remand report, the Ld. CIT(A) recorded certain factual observations contrary to the contents of the remand report and, without pointing out any defect either in the remand report or in the evidence furnished by the assessee, proceeded to reject the claims. It was therefore contended that the order of the Ld. CIT(A) suffers from factual inconsistency and non-application of mind, and the additions deserve to be deleted.
Per contra, the Learned Departmental Representative (“Ld. DR”) fairly admitted that the factual observations recorded by the Ld. CIT(A) appear to be inconsistent with the remand report. The Ld. DR also conceded that in the remand report, the Ld. AO had categorically recommended allowance of all the three claims of the assessee.
We have considered the rival submissions and perused the material available on record. We have carefully gone through para nos. 5, 8 and 9 of the remand report placed at page nos. 107, 108 and 109 of the paper book, which is to the following effect:
On perusal of the above, we find that the Ld. AO, after detailed verification of the relevant documents, bills and books of account, has clearly stated that all the three additions are liable to be deleted. We have also gone through para nos. 8.7, 8.6 and 8.8 of the order of the Ld. CIT(A), which is to the following effect:
“8.6 During the course of assessment proceedings, the AO has stated in the Assessment Order that this was the first year of business of the assessee and the plant was stated to Page 5 of 13 have installed on 26.03.2012. Therefore, the AO has directed to verify installation of the industrial plant the put into use of capital assets. During the remand proceedings, the appellant failed to establish the date of installation of industrial plant and date of put into use of capital assets. The depreciation could not be allowed on the capital assets without put into use. As per factory Act, every machinery before installation needs permission of factory Inspector. In this connection, the CIT (Appeals)-7, Hyderabad has written letter to factory Inspector and factory Inspector informed that they do not have any record. In the appellant’s case, the appellant could not establish the date of installation of industrial plant and the date of put into use of capital asset. Therefore, the addition made by the AO on account of depreciation of Rs.10,39,721/- is confirmed. The appellant has raised the objection on addition on depreciation through ground no. 4, therefore, ground no. 4 is decided against the appellant. 8.7 The appellant has claimed that deduction of Rs.18,52,037/- u/s 80JJA of the Act and the AO has denied the deduction u/s 80JJA of the Act. The appellant could not establish the date of installation and date of put into use of capital assets at the time remand proceedings. Appellant failed to submit the copy of the factory license, date of installation and date of put into use of capital assets. In the absence of fundamental documents, it is not possible to allow deduction u/s 80JJA of the Act. Therefore, the denial of deduction u/s 80JJA of the Act is confirmed. The appellant has raised the objection on denial of deduction of Rs.18,52,037/- u/s 80JJA of the Act through ground no. 2, therefore, ground no. 2 is decided against the appellant.
8.8 The appellant could not prove the genuineness of purchases to the extent of Rs.21,37,925/-. The opportunity was given to the appellant at the time of remand proceedings also whereas the appellant has not furnished the name, address and PAN of the party from whom the purchase was made. During the appellate proceedings also, the appellant has not furnished the crucial details such as PAN, address and other details. Therefore, the addition made by the AO on undisclosed purchases of Rs.21,37,925/- is confirmed. The appellant has raised the objection on undisclosed purchases of Rs.21,37,925/- through ground no. 5, therefore, ground no. 5 is decided against the appellant.”
On perusal of the above, we find that while rejecting the claims of the assessee, the Ld. CIT(A) has recorded certain factual observations which are contrary to the findings contained
Page 6 of 13 in the remand report. Notably, the Ld. CIT(A) has not pointed out any defect in the remand report of the Ld. A.O. Therefore, in the absence of any adverse material brought on record and in view of the categorical findings and recommendations of the Ld. AO in the remand proceedings, we find no justification in sustaining the additions made by the authorities below. Accordingly, ground nos.2, 5 and 6 raised by the assessee are allowed, and the Ld. AO is directed to delete the additions of Rs.18,52,037/-, Rs.10,39,271/- and Rs.21,37,925/- respectively.
Ground no. 3 of the assessee relates to the addition of Rs.36,01,788/- made under section 69 of the Act on account of alleged unexplained capital introduced during the year under consideration. In this regard, the Ld. AR invited our attention to para nos. 6 to 6.2 of the remand report and submitted that out of the total capital introduction, a sum of Rs.10,00,000/- pertained to Shri VPR Vittal, which had been received through banking channel towards adjustment of earlier advances. It was submitted that the said amount was inadvertently clubbed under the capital account. The Ld. AO, during remand proceedings, after examining the records, accepted this explanation and categorically recorded in the remand report that the amount of Rs.10,00,000/- stands explained. 11.1 Further, with regard to the balance capital introduction of Rs.27,00,000/-, the Ld. AR submitted that, during the remand proceedings, the assessee had clearly explained before the Ld. AO that the said amount was received from his parents and close relatives. However, the Ld. AO did not accept the explanation on the ground that the assessee could not furnish
Page 7 of 13 complete particulars such as names, addresses, and PAN of the respective persons. The Ld. CIT(A) also upheld the view of the Ld. AO and sustained the addition of Rs.27,00,000/- on similar reasoning. 11.2 The Ld. AR submitted that the assessee has now filed an affidavit of his father before this Tribunal as additional evidence, affirming on oath that the amount of Rs.27,00,000/- was provided to the assessee during the relevant year. It was submitted that this additional evidence goes to the root of the matter and deserves to be admitted in the interest of substantial justice. The Ld. AR therefore prayed that the affidavit be admitted and appropriate relief be granted.
Per contra, the Ld. DR submitted that so far as the amount of Rs.27,00,000/- is concerned, the assessee had only made a general claim before the Ld. AO that the amount was received from parents and relatives, without furnishing any supporting details such as identity, capacity, or confirmation. On that basis, the Ld. AO rejected the explanation and the Ld. CIT(A) confirmed the same. The Ld. DR further submitted that the affidavit of the assessee’s father has been filed for the first time before this Tribunal and has not been subjected to verification by the lower authorities. Therefore, the same requires proper examination by the Ld. AO. He accordingly prayed that the issue relating to Rs.27,00,000/- be restored to the file of the Ld. AO for de novo verification. 12.1 Further, with regard to Rs.10,00,000/- relating to Shri VPR Vittal, the Ld. DR submitted that there are contradictions in the record and explanation furnished by the Ld. AR. He pointed
Page 8 of 13 out that as per remand report, the amount appears to have been received during the year through RTGS, whereas as per the ledger account relied upon by the assessee (page no. 201 of the paper book), the amount represents opening balance. He further highlighted inconsistencies in the capital balances as appearing in the balance sheets for two consecutive years. On these grounds, he submitted that even this issue requires fresh verification.
We have heard the rival submissions and perused the material placed on record. In this regard, we have gone through para nos. 6 to 6.2 of the remand report placed at page nos. 107 and 108 of the paper book, which is to the following effect:
13.1 On perusal of the above, we find that so far as the amount of Rs.27,00,000/- is concerned, the assessee had Page 9 of 13 explained before the Ld. AO that the said amount was received from his parents and relatives. However, admittedly, no documentary evidence was furnished before the lower authorities to substantiate the said claim, and on that basis, the explanation was rejected by both the Ld. AO as well as the Ld. CIT(A). The assessee has now filed an affidavit of his father before this Tribunal affirming that the amount was advanced by him to the assessee during the relevant year. In our considered view, the said affidavit constitutes material evidence which goes to the root of the issue. Since this evidence has not been examined by the lower authorities and considering that the matter involves determination of factual aspects, we deem it appropriate to admit the additional evidence in the interest of justice and restore the issue to the file of the Ld. AO for proper verification. 13.2 So far as the amount of Rs.10,00,000/- stated to be relating to Shri VPR Vittal is concerned, we have gone through the ledger account of Shri VPR Vittal placed at page no. 201 of the paper book, which is to the following effect:
13.3 On perusal of above and para no. 6.1 of the remand report, reproduced herein above, we find that there are Page 10 of 13 contradictions on record. On one hand, the remand report suggests receipt during the year, while on the other hand, the ledger account filed by the assessee suggests that the amount represents opening balance. Further, the inconsistency pointed out by the Ld. DR in the capital figures reflected in the balance sheets for the years ending 31.03.2012 and 31.03.2013 also requires reconciliation and verification. In this regard, we have gone through the balance sheet of the assessee as on 31.03.2012 placed at page no. 204 of the paper book, which is to the following effect:
13.4 We have also gone through the balance sheet of the assessee as on 31.03.2013 placed at page no. 64 of the paper book, which is to the following effect:
Page 11 of 13 13.5 On perusal of the balance sheet of the assessee as on 31.03.2012 and 31.3.30213, we find that the closing balance of capital of the assessee as on 31.03.2012 is Rs.8,94,941/- and the opening balance of capital of the assessee in financial year 2012- 13 is Rs. 2,52,114/-. Hence there is mismatch of balance in closing balance and opening balance of the capital. These factual inconsistencies requires factual verification at the end of the Ld. A.O. Therefore, the same is required to be remanded to the file of the Ld. AO for fresh verification. 13.6 In view of the above discussion and considering that (i) additional evidence has been admitted by us, and (ii) factual inconsistencies exist on record requiring verification, we deem it appropriate to restore the entire issue relating to addition of Rs.36,07,788/- under section 69 of the Act to the file of the Ld. AO for de novo examination. The Ld. AO shall verify the additional
Page 12 of 13 evidence, examine the source of capital introduction, reconcile the capital accounts, and thereafter pass a fresh order in accordance with law after affording reasonable opportunity of being heard to the assessee. Accordingly, ground no. 3 of the assessee is allowed for statistical purposes.
In the result, the appeal of the assessee is partly allowed for statistical purposes.